India Microfinance

Are there cultural determinants of Entrepreneurship ?

Legend would have it that ‘a pen is mightier that sword’ and for good reason. But if you were to go by a recent study by the Small Enterprise and Finance Centre (SEFC) at IFMR, the tiny pen can tell you a thing or two about the preferences of the guy who bought and sold that pen. Intrigued? Read on.

The spotlight on marquee multinationals and big brands aside, small and medium enterprises are at the heart of the nation’s economy. It can be a complex endeavor to understand the multitude factors that interplay when it comes to the way they approach their business – key amongst which would be ethnicity, thanks to the vast diversity that exists across the nation.

Dwelling deep, does ethnicity influence the choices that small business owners make when it comes approaching business decisions and strategies employed towards trade? There have been no systematic studies that have been able to document its holding good; precisely an outcome that SEFC set out to close on. The research set out to test whether indeed there are important differences in trading strategies and business practices across small business owners that come from different ethnic backgrounds.

For this purpose SEFC, after careful deliberation and keeping in mind a few factors, identified the wholesale pen industry for its research. Parrys, a locality in North Chennai, with a name sounding similar to an exotic foreign capital was chosen for research. For a visitor, Parrys can be anything but its similar sounding cousin: Chaotic, dusty, crowded and fast-paced, yet the locality has a rhythm of its own. Sandya Kumar, senior researcher on the study calls it “a wonderland for researchers and one of the best places to study small enterprises in Chennai”.

SEFC adopted an audit-study approach to the research, simulating a transaction in real-time, for which it identified a total of 47 entrepreneurs from 3 different communities – Marwaris, Tamilians and Andhrites. These entrepreneurs (called auditors) after extensive training and under strict supervision were asked to hit the wholesale market with a tailor-made script to follow. They visited 107 shops owned by mixed ethnicities and placed orders for pens – both customized and non-customized. The investigation lasted for a year and the research findings conclude that ethnicity of the parties involved did play an important role in determining the features of the business transaction.

In-depth findings of the study can be viewed in the presentation below: